Mutual funds riding AI wave: Have you invested in these funds?

In the fast-evolving landscape of technology, Artificial Intelligence (AI) has emerged as a transformative force, revolutionizing various aspects of our daily lives. From personalized recommendations on platforms like YouTube to advanced language models like ChatGPT, AI has become an integral part of our digital experience. According to PwC, AI is poised to contribute a staggering USD 15.7 trillion to the global economy by the end of the coming decade, making it a significant player in the world’s economic landscape.

The AI Giants: A Global Perspective 

Several companies have positioned themselves at the forefront of the AI revolution, shaping the future of this dynamic industry. Notably, eight major players have been identified as part of the AI pack, including Alphabet (Google), Amazon, Meta (Facebook), Intel, NVIDIA, and more. While none of these AI giants are based in India, Indian investors are strategically positioning themselves to tap into this lucrative market.

Passive Funds: Riding the AI Wave 

For Indian investors seeking exposure to AI, two avenues stand out passive and active mutual funds. Passive funds, such as ETFs and index funds, offer broad exposure to the AI sector by tracking major indices like the NASDAQ. In the Indian market, top-performing passive funds include Motilal Oswal Nasdaq 100 ETF and Mirae NYSE FANG+, which allocate a significant portion of their investments to AI-exposed stocks.

Active Funds: Concentrated AI Investments

On the other hand, actively managed funds showcase concentrated AI investments among a select few. The top five active funds collectively hold an impressive 88% share, amounting to approximately Rs 12,000 crore in investments. Parag Parikh Flexi Cap Fund leads the charge, channelling nearly Rs 7,000 crore into AI stocks, constituting 16% of its scheme. SBI Mutual Funds, including SBI Focused, SBI Flexicap, and SBI Magnum, also stand out with varying allocations to AI companies.

Mutual Funds and AI: A Winning Combination

Mutual funds emerge as a compelling option for investors looking to ride the technological wave of AI. Investing directly in individual AI stocks can be risky due to the field’s youth and volatility. Mutual funds, with their diversified portfolios and professional management, offer a safer and more convenient way to gain exposure to AI companies.

Benefits of Investing in AI-Focused Mutual Funds 

• Gain exposure to a variety of AI companies across different sectors, such as healthcare, finance, and technology.
• Experienced fund managers conduct in-depth research to identify promising AI players.
• Invest in a single fund to access a diversified portfolio of AI stocks, saving time and effort.
• AI is expected to be a major driver of economic growth, offering significant long-term investment potential.

Choosing the Right AI Mutual Fund 

When considering AI-focused mutual funds, investors should weigh factors such as investment objectives, risk tolerance, fund fees, and past performance. Actively managed funds and passive index funds each have their merits, catering to different investor preferences and strategies.

The Future of AI Investing in India

As AI continues to evolve and permeate various industries, the demand for AI-focused investment options in India is likely to grow. Mutual funds are well-positioned to meet this increasing demand, offering investors a convenient and diversified way to participate in the AI revolution. As the world moves towards an AI-driven future, Indian investors have a unique opportunity to align their portfolios with the technological advancements reshaping the global economy.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.